A lot of domestic beer makers are facing the risk of having their workshops dissolved as the Ministry of Finance has suggested raising the luxury tax on bia hoi, the main product of local small brewery workshops, to 50%. The luxury tax bill is expected to be submitted to the fourth session of the National Assembly for approval.
"The information about the increase of the luxury tax to 50% has dazed beer makers," said Nguyen Canh Hua, director of Habada, who added that no small local brewery workshop can bear such a high tax rate.
Hua said that even with tax rates lower than 50% (30% in 2006 and 2007, and 40% in 2008), beer makers have been miserable, as they have to pay higher fees for labour costs, transport fees, and input materials.
"A lot of brewery workshops will have to shut down," said Le Van Huy, deputy general director of A Chau Beer. Huy said that bia hoi has a short time of preservation and use (3-5 days), low alcohol content, and the main input material is rice, which Vietnam does not have to import. Moreover, bia hoi mainly serves labourers who have low incomes. Therefore, the most suitable luxury tax for bia hoi is 8% only.
Recently, Viet Ha Brewery Co sent an urgent dispatch to minister of Finance Vu Van Ninh, saying that after the luxury tax was raised by 10% to 40%, as of January 1, 2008, the output of brewery workshops in the first seven months of 2008 decreased sharply by 20% over the same period of 2007. If the tax rate is raised further, hundreds of local brewery workshops will go bankrupt, pushing tens of thousands of labourers working in production and distribution places into unemployment.
Meanwhile, the luxury tax bill compilers still insist on the tax increase from 40% to 50% on bia hoi, and decrease on canned and bottled beer from 75% to 50%, because Vietnam does not encourage bia hoi production, as it is considered to not meet food safety standards.
However, Pham Kim Son, general director of Viet Ha, said that the application of the single tax rate of 50% would not create a fair playing field for enterprises as tax compilers think. On the contrary, it would generate unfair competition among big companies with well-known brand names and small ones with less prestige.
Son said that local brewery workshops, which are facing too many difficulties, cannot mobilise capital to import technologies for bottling and canning beer.
The leader of a joint-stock company related that in Japan in the 1990s when the economy fell into recession, consumers had to tighten their belts and consume low-cost products. In order to meet the demand for low-cost products, a product was marketed in 1994 called happoshu, like Vietnam's bia hoi, which could enjoy the tax rate 60% lower than normal beer. As a result, Japan protected local production, created more jobs and encouraged using locally-sourced materials.
"Vietnamese state management agencies should learn experience from Japan's happoshu and set up a suitable tax policy," he said.
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